Things to Know Before Retirement Planning For NRIs

Retirement should be made an integral part of your financial planning. In order to maintain your current standard of living and to have your money’s worth, you need a considerable amount of forethought. Especially as an NRI, there are additional things to consider if you are planning to settle in India post retirement. There are important questions to be answered in terms of where you plan to retire, number of dependents, outstanding liabilities, investment opportunities, etc.

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While a lot of people move abroad for better education and professional opportunities, many choose to come back to India after retiring. NRIs who are are planning their retirement in India need to build a corpus that allows them to sustain their standards of living while also accommodating other expenses. Here are some things to note before an NRI sets forth to plan his/her retirement in the country. 

  • National Pension Scheme (NPS) - NPS is a savings scheme that was launched by the Government to enable subscribers to contribute to a fund regularly and reap the benefits after retirement in the form of regular pension. It offers guaranteed income, comes without any market risks, and is therefore considered a safe investment choice. 

  • Amount of Retirement Corpus - Evaluate your future needs and create a nest egg that is at least 25 times the estimated annual expenses at the time of retirement. Take stock of your current financial assets including mutual funds, bonds, securities, FDs, etc. to understand how well you are positioned to build the estimated corpus. 

  • Making Strategic Investments - Since you are considering retiring in India, you should invest in Indian assets to calibrate currency price fluctuations against the Rupee. You may also want to start liquidating your foreign assets including real estate or retirement savings accounts like 401k if you are currently a citizen of the US. 

  • Systematically Channelize High-risk Investments - While investing 100% of your money in equities may generate returns faster and get you closer to the desired corpus, you should know that these investments come with high risks. Make sure to channel high-risk equity investments in a way that offsets market fluctuations. One way to do that is to diversify your investment portfolio. 

Factors To Consider For Retirement Planning By NRIs

  1. Time left to retire

    Figure out by when you would like to retire. Once you know, you can plan exactly the amount you will need to save or invest till that age to achieve your retirement goal.

  2. Retirement goals

    Your post-retirement financial needs shall depend on the number of dependents, the standard of living, responsibilities, etc. Healthcare budgeting and accounting for emergency expenses should also form a part of your financial planning.  

  3. Inflation

    When calculating your retirement budget, factor in the rate of inflation in India and account for cost appreciation. Your current standards of living shall most likely be costlier in the longer term. Household daily expenditures, healthcare, education, and every other sector is going to be affected by inflation. 

  4. Choose your relocation nest

    As an NRI, if you are planning to retire in India, you probably already have an idea of where you want to settle. Your retirement planning should factor in the place of relocation, given that living expenses vary significantly across metropolises and villages.   In addition, if you are planning to buy a new property to settle in, you should account for the loan amount as well. 

  5. Risk tolerance and investment options 

    Know that sticking to safe investment avenues may not be sufficient to generate enough funds to beat inflation. As mentioned above, you should diversify your investments among equities and debt funds. However, to reach your retirement goal by the desired age of retirement, you should develop a risk tolerance and invest in market-linked instruments. 

Mistakes To Avoid While Retirement Planning For NRIs

Some of the commonly made mistakes that make it difficult to build the desired retirement coverage for NRIs are as follows:

  • Irregular savings and waiting to invest later in life

  • Not accounting for inflation in the country where you want to settle

  • Improper assessment of investment opportunities in the country of relocation

  • Buying a pension plan without customizing it to fit future retirements

Best Retirement Plans For NRIs

Plan Name Minimum Age Maximum Age Policy Term/Annuity Options Annuity to Spouse Tax Benefits*
Aviva Wealth Builder Plan 5 years 50 years Policy Term: 13, 15 & 17 years NA Applicable
Bajaj Allianz Life Pension Guarantee Plan 37 years 80 years Life Annuity and 5,10,15, 20 years 50 and 100 percent Applicable
LIC Jeevan Akshay 30 years 65 years Life Annuity and 5,10,15, 20 years  50 and 100 percent NA
LIC Jeevan Nidhi Plan 20 years 60 years Life Annuity and 5,10,15, 20 years 50 percent U/S 80CCC
National Pension Scheme for NRIs 18 years 60 years - -

Up to Rs. 1.5 Lakhs

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

* Tax benefit is subject to changes in tax law

Summing Up!

NRIs have to pay attention to more factors while planning their retirement in India. NRIs should make a note of the currency movements in India, laws surrounding investments in India, taxation of benefits, etc., to plan a comprehensive post-retirement budget. It is further recommended to keep your documentation updated in terms of KYC, investment portfolio, Demat and trading accounts, and foreign assets to make the transition to India after retirement smooth and hassle-free.

*Past 5 Year annualised returns as on 01-07-2024
*All savings plans are provided by the insurer as per the IRDAI approved insurance plan. Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.

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